03:41 PM EDT, 04/04/2024 (MT Newswires) -- Ulta Beauty's ( ULTA ) downbeat views on the beauty category likely warrant "a more conservative" stance on the segment for the rest of the year amid an increasingly competitive business environment, Oppenheimer said Thursday.

The beauty retailer's chief executive, Dave Kimbell, said at a conference Wednesday that the company has seen a slowdown in the beauty category so far this year across price points and segments, according to a Capital IQ transcript. "That's a bit earlier and a bit bigger than we thought." Kimbell said that Ulta Beauty ( ULTA ) has also seen the mass and prestige segments "moderate meaningfully" from fourth-quarter trends.

The retailer's shares plunged nearly 15% Wednesday, but were up 3% in Thursday late-afternoon trade.

Oppenheimer said it's unclear if the deeper moderation was "a blip or something more," prompting the brokerage to take a more conservative view on the beauty business for the remainder of the year.

For fiscal 2024, the company expects comparable sales growth of 4% to 5%, with the first half expected in the low-single digits and second half in the mid-single digits, Chief Financial Officer Paula Oyibo said on the call. If the beauty headwinds persist, Ulta Beauty ( ULTA ) would expect first-quarter comparable sales to be on the lower end of "that first-half guide that we provided of the low-single digits," Oyibo added.

Oppenheimer lowered its 2024 earnings outlook for the retailer to $26.05 per share from $26.45. The brokerage cut its price target on the stock to $500 from $600 and removed Ulta Beauty ( ULTA ) as a top pick, citing near-term category uncertainty and an increasingly competitive beauty backdrop.

"Ulta has been slightly more aggressive on the promotional front lately per our coupon tracker, and we are increasingly concerned a more promotional backdrop could emerge from here," Oppenheimer analysts, including Rupesh Parikh, said in a note.

Ulta Beauty's ( ULTA ) downbeat views could prove to be "another obstacle" for Estee Lauder's ( EL ) management to drive margins back to the high teens, Oppenheimer said. The brokerage said its focused on the company's ability to deliver on "an aggressive profit recovery," as projected by Wall Street, according to the note.

E.l.f. Beauty's (ELF) "fundamental momentum" likely remains intact, though a softer beauty environment could weigh more on the company's multiple than on its fundamentals, the analysts said. "Management has materially outperformed the category for several quarters," according to Oppenheimer.

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